Sunday, September 02, 2007

Real Estate in Loreto

It is September and everyone in Loreto has just about had enough of the heat and humidity, torn up streets throughout the entire downtown, and lack of tourists and activity. Most of us with experience know that things are about change. One more month and hopefully the main streets will be paved, shops and restaurants open full time, and people coming and going … happy to be here once again.

Every morning I drive to work, I see shop keepers out sweeping their store fronts and cleaning windows, and municipal street cleaners picking up litter and keeping the Malecon immaculate. This week the Town of Loreto had all its municipal workers out for 2 mornings sweeping all the streets of Loreto, and there were truckloads of dirt accumulated and taken away. It was great to see and made a huge difference, if only for a few days. With all the construction happening in Loreto and Nopolo, it is inevitable that we will be living in a dust zone for several years.

In the meantime, it’s a Dog’s Life and the animals are free to roam unbothered by humans. Please be very careful driving at this time of year as the animals come out at night to graze when it is cooler. They are beautiful to see during dusk, but very dangerous on the roads after the sun goes down.

The highlight this week was receiving a $1,000 donation towards Yolanda’s home addition from Neil Ginsberg, who is the developer on the Marbella Project (old Whales Inn). The project is moving ahead at the typical Loreto speed, which is “Hurry Up and Wait” and we are still taking names of people interested in receiving more information. A very big THANK YOU to Neil, as well as Susan Hill, Chris Sessions, and Emmanuel Huna, who also contributed this week. We are halfway over our goal of $2500 USD to assist Yolanda.

There is a certain energy and anticipation that happens after Labor Day weekend (USA and Canada). This is the time people decide to get back to business and back to an organized life. In Mexico, this seems to happen after Independence Day of September 16. It is the last hurrah and party of the summer and I look forward to being part of the celebrations here. Please let me know if you are here during that time, and we will organize a beach party or gathering.

I have always said this place is like the Wild Wild West, and that certainly applies when it comes to real estate. We have seen land values triple to increases of tenfold in the last three years. In the last six months since I have been actively involved in real estate, I have been shocked and dismayed at what I have seen. As in any early real estate boom that is a seller’s market, the buyers are driving prices up by insane levels. There are properties that would have sold a year ago for $100,000 and now the seller says they have an offer for $500,000.

Since there have been only a few established Realtors in town, the trend is for all the locals to sell the foreigner “friends” real estate for as high a price as the buyer is willing to pay. The buyer compares prices with USA prices and thinks this is a great deal and jumps at the opportunity to buy land at what seems like a steal. The Seller, Buyer and Buyers’ Representative have no real market knowledge of the different areas, comparative data, understanding of the different title transfers, cost of construction, permitting processes, and environmental hoops affecting many areas.

It is impossible to tell a Seller that his property is worth $$ at today’s market, when some Canadian or Americans are supposedly willing to pay upwards of 50% more. These private deals also backfire because the foreigner will offer much less than market value and because the Seller is not willing to be represented by a Real Estate professional, they accept less than what they should.

This summer there has been a sale of a simple 3 bedroom home on the beach just north of Loreto for $1.4Million USD. It was a comfortable home, with large garage and approximately 10,000 sq. ft lot, but certainly not with finishes that we would expect for this price. There was also a vacant lot with no water or sewer services, on the beach nearby that was less than 5,000 sq. ft that sold for $720,000 USD. All of Loreto is talking about the craziness of these buyers that have set expectations for future sellers.

We are still at the beginning of the real estate boom and it is certainly not too late to invest, but do so with professional advice. There are a few good real estate offices in town and we are joining forces to work together and place rules of ethics, education, and standards to the profession here that buyers are accustomed to expecting.

I do not believe that any private sellers or local representatives intend for things to go astray, and many times there will be a good deal that completes smoothly for all parties. However, if it sounds too good to be true… it generally is. We have many people come to us after the fact and want to involve our services after they have paid the full purchase price and have little or no transfer papers years after the fact. There is little that we can do at this point, except hope that the Seller will perform on their promises in a complex bureaucratic legal system.

Finding the great property and making an offer is only 20% of the work to actually buying it and getting it into your name. Things are done very different here even compared to mainland Mexico, and you must stay on top of the process. Talk to anyone that has done it. These are not scare stories, but the reality of life. Cavet Emptor – Buyer Beware works in every country.

On the flip side, we see very good deals from small industrial lots to the well funded clients buying up as much of the large parcels (over 1000 hectares or 500 acres) as quickly as they can. This is money from Spain, Mexico, USA, Canada, and Europe. Also, many smaller investors ($2M to $200 Million) are circling the area as well. Even if you have paid a little too much now… the market will catch up and it will still be a good investment in the long run. Just make sure you get your paperwork!!

There is no doubt that we are in for exciting times ahead. Have a great week!

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